Due to growing concerns about alcoholism, effect of alcohol on health and other social concerns, alcoholic beverages companies were further under constant pressure to diversify. Internationalization was a key component of this strategy and so was diversification and acquiring complementary brands. This applied to beers, spirits and wines. The companies, generally, found it easier to diversify into sectors where they could draw upon some common manufacturing, marketing or distribution knowledge. Only the companies who were able to develop a coherent strategy, worked on building marketing knowledge, expanded internationally and diversified appropriately were able to survive. Others were either liquidated or acquired by other companies in the long term. The spirit producers were the first to diversify due to possibility of controlling the production process and relative ease of transportation, followed by beer brewers (discovery of the process of pasteurization of beer helped). Wine producers were the last to diversify due to inherent difficulty in maintaining a consistent quality of the wine from year-to-year.
The book mentions four waves of consolidations since 1960, with British companies leading the pack. In first two phases consolidation took place at a national scale in form of mergers and acquisitions. Phase three saw the birth of global alcoholic beverages firms as we know them today. Firms no only merged across borders with each other, there was also a lot of vertical integration and diversification. Some M&A activities came under the scanner of anti-trust enquiries and blockades for the first time. The last phase has seen rationalization and assimilation of resources and the emergence of trading of brands like a piece of intellectual property. Given the high cost of developing a brand from the scratch, brands in this industry tend to outlive the founders and even the company. Very few new brands are able to make a global mark, and need a sustained & well-thought branding strategy.
Another thing that I have learned is the basic ways in which a company can attempt to break into an international market: e-commerce, merchant houses, agents, distributors, an employee working in the new country, wholly owned distribution channels, partnerships, M&A and starting a new business on their own. The choice depends on the industry in question, desired control on marketing and distribution, the ease with which the company may want to come out of the market, risk appetite and the desired level of expenditure. Overall, the book helped me to take a fresh perspective on consumer goods industry and the strengths (and weaknesses) of a family owned enterprise compared to a firm run by professional managers. I also came to appreciate the role of branding and the marketing knowledge gained over time in the life of a company. Another interesting Business History book over, time to move on to the next one!
The book mentions four waves of consolidations since 1960, with British companies leading the pack. In first two phases consolidation took place at a national scale in form of mergers and acquisitions. Phase three saw the birth of global alcoholic beverages firms as we know them today. Firms no only merged across borders with each other, there was also a lot of vertical integration and diversification. Some M&A activities came under the scanner of anti-trust enquiries and blockades for the first time. The last phase has seen rationalization and assimilation of resources and the emergence of trading of brands like a piece of intellectual property. Given the high cost of developing a brand from the scratch, brands in this industry tend to outlive the founders and even the company. Very few new brands are able to make a global mark, and need a sustained & well-thought branding strategy.
Another thing that I have learned is the basic ways in which a company can attempt to break into an international market: e-commerce, merchant houses, agents, distributors, an employee working in the new country, wholly owned distribution channels, partnerships, M&A and starting a new business on their own. The choice depends on the industry in question, desired control on marketing and distribution, the ease with which the company may want to come out of the market, risk appetite and the desired level of expenditure. Overall, the book helped me to take a fresh perspective on consumer goods industry and the strengths (and weaknesses) of a family owned enterprise compared to a firm run by professional managers. I also came to appreciate the role of branding and the marketing knowledge gained over time in the life of a company. Another interesting Business History book over, time to move on to the next one!
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